Have you ever lost your keys? You turn your house upside down looking for them? You exhaust all possibilities? And then find them right under your nose?

Corporate innovation can be similar to this scenario. Often, companies spend a lot of time and resources searching for innovation possibilities. They scour remote recesses of their organizations. What they miss, however, is that an innovative option might be right in front of them.

Sears was in this situation. Their lost item was revenue. For years they’ve struggled, bleeding money. Once bustling stores now frequently stand full of merchandise but absent of customers. They changed leadership, restructured, closed stores, experimented with sales and promotions. But there was little improvement. Customers continued to shop elsewhere.

It took them a long time to see that while there were many things going wrong with the company, there were some things that were going well. And a path to profitability could be built on this existing strength. That strength was their delivery process. Born from their sales of large appliances, Sears had developed an infrastructure for delivering large items, installing them, and removing the originals.

So Sears decided to extract their delivery process as a standalone service and focused on ways to leverage that capability. The result is Innovel Solutions. Innovel Solutions is a logistics service set up to deliver large items from big box stores to consumers.

Rebranding their delivery process enabled Sears to approach other big box stores as potential customers. For example, a primary customer of Innovel is Costco. Costco is a competitor to Sears in terms of large appliance sales. But today, if a customer buys a TV from Costco, it will likely be delivered and installed in their home by Innovel (unbeknownst to customers -- a Sears logistics company!).

Innovation Insights From Sears / Innovel

We’re used to seeing innovation examples from Apple or Google. But what innovation insights might Sears have to offer?

Innovations don’t have to be new. They can be something that’s existed for a while or that has slowly grown over time. In some cases, the innovative element is the creative application of a process, technology, or product - how things are taken apart, put back together, or rearranged. Sears has been delivering large items for decades. The innovation is in how this service is now being applied to competitors’ product delivery.

Innovations don’t have to be big. They can start small. Sears started with finding a big partner who was willing to sign on to outsource their delivery – Costco. With the success of this relationship, other big box retailers are following. And the more customers Innovel acquires, the more it invests in its logistics technology, improving the service over time.

Innovations don’t have to be novel. UPS already does delivery. As does FedEx. So why would Costco go with Innovel? They provide more than just delivery. They’ve added installation and removal to the process. Each of these processes exists today as a stand-alone. It’s the combination that’s driving this innovation success.

For companies that are seeking innovative ideas to grow revenue – keep searching. Novel ideas, new concepts, and creative programs are within your grasp. But while you’re brainstorming what could be – don’t forget about what already is. That innovation you’re looking for to drive more revenue your way…it might already be right in front of you.

The Arctic Circle was a hotspot for Effectuation this week. The 4th Effectuation Conference was held in BodØ, Norway, June 6 & 7, 2016. Participants included academics and practitioners of Effectuation from all over the world.

Future Research Questions

Dr. Sarasvathy, the “founder” of Effectuation, was there to offer her insights on where the field is going and what she will be focused on for the coming year. A core area of interest for her is understanding what is at the “core” of Effectuation. The current hypothesis is that the Ask is the foundation for effectual competence.

Insights Ignited is partnering with Dr. Sarasvathy to research how Asking varies between novices and expert entrepreneurs and what we can learn from these entrepreneurs to facilitate entrepreneurial expertise in others. We have collaborated with her on data collection and are now in the analysis phase. Check back for more information. We’ll be writing about this in future blogs.

Assets to Action Model

Sara Whiffen, of Insights Ignited, presented our Assets to Action Model for applying Effectuation. It is a simple, tactile way to walk through the effectual process with teams, and a great way to figure out how to respond to a “VUCA” environment – volatile, uncertain, complex, and ambiguous. The outcomes are specific next steps the team can take as well as a tracking tool to monitor progress.

Participants called the Assets to Action Model a “business model canvas for Effectuation” and expressed a desire to apply it with their teams for both venture creation and as a general problem solving methodology to manage uncertainty. They commented favorably on how it engaged the team in broader discussions, ensured goal convergence, and by driving to concrete action steps, took some of the risk out of innovation.

Large Organizations Seeking Effectuation

We also heard from other Effectuation practitioners who are working with Procter & Gamble, BMW, Boehringer Ingleheim, and even the Catholic Church to solve problems using effectual thinking. It’s amazing to see how this method is taking off with organizations around the world. As things become more complex and uncertain, and traditional predictive tools don’t work as well as they used to, organizations are turning to Effectuation to manage their uncertainty.

Effectuation Increases Employee Contributions

Sara Whiffen was also featured on a panel discussing the opportunities and challenges for Effectuation. One of the questions asked was about the “cash value” of Effectuation. The discussion centered on not just venture creation, but broader societal value. Insights Ignited firmly believes that Effectuation increases the ability to control outcomes in an uncertain world by loosening control over individuals. Instead of requiring others to co-opt an existing vision, Effectuation requires that the vision be shaped by others willing to commit to participating in bringing it into the world.

This idea of loosening control to gain greater control is something that the researchers are exploring in more detail. On a societal level, it heightens the dignity of workers by restoring creative freedom and individual contributions even within highly structured company environments. We are working with companies to help them achieve this while at the same time address corporate shareholder and governance needs. The result: more innovative outcomes, stronger working teams, greater problem solving creativity and ownership, and the accompanying financial metrics to support this.

Public Policy Benefits

Applying Effectuation to public policy was also a topic of discussion. Our view is that focusing Effectuation training on a narrow segment of the population limits its effectiveness. Effectuation is by its nature an exercise among multiple parties. It is not something to be done in isolation. Therefore, training should be open to anyone who is interested. This creates more potential partners as a wider array of people are comfortable interacting in this way, multiplying the cumulative impact.

This was of particular interest to policy makers looking at how immigration is impacting their community and how they can maximize in tandem the opportunities for both newcomers as well as existing members of the community.

For this same reason we encourage companies not to limit Effectuation training to their new product development or innovation teams. While it is possible for these teams to effectively apply Effectuation, the impact is much more powerful when dispersed throughout the organization. We have great examples of how innovation has arrived in some unexpected ways through broader Effectuation exposure.

These were just some of the highlights of 36 hours of Effectuation discussions and non-stop sunlight in the Arctic Circle. Keep checking in. We’ll be writing about these and other specific examples in the weeks to come. And if you have any questions or topics you’d like us to expand on, comment here and let us know.

As graduation season comes to a close, numerous websites offer their take on the best commencement speeches of 2016. Whether delivered with nostalgia, comedy, or regret, they offer graduates inspiration for tackling their next steps as they leave scripted curriculum paths for a world perceived by some as full of opportunity and others as riddled with chaos.

I’ve been thinking about some of my graduates, those who I’ve taught Effectuation to, and their stories. When people reflect on Effectuation and how it’s impacted their lives, I often hear them refer to it as “empowering”. I think the Pilot in the Plane principle has a lot to do with this.

Pilot in the Plane Principle

This is the mindset principle. When teaching Effectuation, some teach this principle at the end as the unifying principle. I prefer to start with it.

I find this principle is foundational. It is the belief that the future does not have to be known and predicted. Rather it can be controlled.

Pilot in the Plane Principle says that what you do matters. That success in innovation is not predetermined. It is not limited to those with an MBA. Or a research team. Or a big product development budget. Or who are located in New York City or Silicon Valley or London or Tokyo. While none of those attributes necessarily inhibit entrepreneurial success, they are not a requirement for it either.

Effectuation is a great equalizer. It recognizes that it’s not a single ingredient, but a combination of things, the process of bringing those things together, and the mindset to believe that you can make an impact, that creates new markets.

Effectual Mindset in Action

I am reminded of a young woman who received some Effectuation coaching recently. She didn’t have a particularly nurturing upbringing. During high school her grades were fairly middle of the pack. She didn’t cause trouble and didn’t attract praise. She enjoyed art and wood shop, things that she could make with her own hands. But she pretty much did as she was told, putting up with “the system” until she graduated.

Not particularly academic, she didn’t pursue college. Instead, she opted to go into contracting. Her focus was masonry and tiling. After working for a few years, she began to be recognized for her handiwork. Eventually, the thought of working for herself began to gnaw at her. Not knowing how to go about setting up her own business, she enrolled in a business class at the local community college.

In class, she was asked to speak about the greatest obstacle preventing her from going off on her own. She answered, “I’m a woman. And most people don’t think of asking a woman to do this kind of work”.

Her “market research” was showing that there wasn’t an opportunity for someone like her in this line of work. She could either change who she is, or what she does.

Fortunately, her teacher was instructing her in the effectual method. He challenged her not to accept the future as determined, but to change her mindset to one of “how can I turn this potential obstacle into a benefit?”

The result? She changed her thinking. Instead of focusing on what she couldn’t do, she thought about how she might be able to impact her career outcomes. She reached out to other women she knew in the industry with different skill sets but similar complaints. They discussed possible collaboration opportunities and decided to create a “by women / for women” contracting agency. They began to understand that many women are responsible for overseeing the maintenance work done by contractors during the day. These women might prefer having a female contractor working in the house while they are home alone instead of a male. Also, they began to look at ways they could better communicate with and educate women on issues in their industry.

When asked how she felt after applying Effectuation to her business, she replied, “I now have a big strength. I can do this because what I once perceived as negative societal factors I now see may give me an edge and put me on top of many established businesses”. She is confident and enthusiastic about creating her future. Now, she wrestles with having more ideas and possibilities for growing her business than time to achieve them all.

So to those who are embarking on something new, something unscripted, something unknown, I encourage you to embrace Effectuation. It won’t give you the power to predict the future, but it will give you the confidence and optimism to face it and the tools to create the future as only you can imagine.

Who do you call when you’re in need of innovation help? For many companies, the answer is a design thinking expert.

Design thinking first emerged in the 1990s and has grown in popularity. It’s a problem solving approach that gained momentum at Stanford. Now firmly embedded in Silicon Valley, it has had a worldwide impact. The systematic approach appeals to many corporate managers.

But businesses make a mistake when they rely solely on this approach to innovation. In today’s business environment, there are two primary ways in which design thinking falls short.

1. Design thinking is idea focused.

Design thinking starts with a goal in mind. It encourages people to identify problems and then seek the solutions to them. The solutions are often creative and result in an unexpected outcome.

The problem with this is that great ideas don’t always make it to market. In the context of a business, market acceptance is key. And while the solution developed in the design thinking framework might be fantastic, if it’s too expensive to manufacture or lacking in customer acceptance, etc., it might remain just that – a great idea.

2. Design thinking is feedback focused.

Design thinking encourages people to solicit feedback from stakeholders. This is done through both ethnographic observation as well as direct conversations. As more data and opinions are collected, the design thinking team incorporates the feedback into the product / service build. However, despite all of the conversations, the most important one is often missing –that of asking someone to commit to purchasing the new product.

Effectuation addresses these shortcomings in the following ways:

1. Effectuation is assets focused.

Effectuation starts with what you have on hand. Tangible assets, intangibles, excess, slack, waste, anything that is accessible is fair game. This shifts the emphasis away from an acquisitive strategy to one of optimizing existing resources. In today’s budget constrained environment, it’s a much more effective approach for organizations. Rather than focus on building from scratch or buying from others, it begins with leveraging what is already available and building out from there.

2. Effectuation is commitment focused.

Effectuation is based on commitments from participants. Decisions to invest, bring products to market, change course, etc. are based on actual commitments from stakeholders. These commitments can take many forms. They can include letters of intent, prepaid purchase agreements, partner contracts, among others. The primary objective is to attain stakeholder agreement to contribute resources to the venture to ensure its success.

Many of the companies we work with begin their discussions with us by saying “we did lots of customer research where they told us they liked this idea, but when we brought it to market it didn’t sell”. This is because they only solicited feedback. We prevent this by showing them how to use a commitment driven approach when interacting with customers and other stakeholders.

Even innovation has undergone innovations since the 1990s, when design thinking emerged. Add effectuation to your innovation skill set. Whether as a complement to design thinking or as a stand-alone innovation tool, effectuation works.

Most people have a love / hate relationship with email. While convenient it can also quickly become overwhelming. It’s been a hallmark of the digital age. And it’s also ripe for innovation. Now there’s Slack. Slack is a communication tool that’s aiming to address the annoyances of email while maintaining its benefits. And it has over 2.5 million people on board as active users.

Stewart Butterfield, the CEO of Slack, saw the time was right for upending traditional email. An MBA, he researched the industry, talked with potential users, got their feedback, and built a business plan to revolutionize the way email is used. After convincing a wealthy investor to fund his new platform, he rolled it out to great fanfare with a huge marketing budget and nationwide launch.

Or did he? Here’s the real creation story for Slack….

Stewart Butterfield, a college graduate with a degree in Philosophy, was very interested in the study of the mind and how people think. He gathered some friends of his and set out to build a new online-video game called “Game Neverending”, a massive multiplayer roleplaying game. Along the way, they built a photo sharing platform which they used among themselves. After a few years, it was clear that the video game was going nowhere, but Stewart was able to extract the photo sharing platform and build it into Flickr.

His interest in online gaming persisted and he gathered a group together a few years later to collaborate on the production of a new game idea called “Glitch”. To facilitate communications between the team members and organize the project, they built a custom communication tool. Glitch also failed. But that communication tool that the team was using was again extracted. It was the origins for Slack.

In “The Slack Generation”, an article that appeared in the May 14th edition of The Economist (http://goo.gl/e2HjcP), they claim that Mr. Butterfield is “wonderfully unlucky”. I claim that he is Effectual.

Mr. Butterfield experienced two big failures in his quest to create new online games. But each time, he was able to turn the failure into something positive. This is part of the effectual mindset that converts failures into opportunities (the Lemonade Principle of Effectuation). He took remnants of his failed projects and turned them into valuable assets. In fact, he made $35 million on his first failure when Yahoo purchased Flickr in 2005.

The future of Slack remains to be seen. There’s a lot of speculation as to whether it will be acquired or go public. But my guess is that Mr. Butterfield isn’t one of those who are speculating. Instead, he’s effectuating his path to innovation success.

Failures can be funny. The Pontiac Aztek. New Coke. Microsoft Zune. These have all been the butt of jokes. But the companies responsible for them weren’t laughing with the rest of us.

There’s been a lot written about the need to accept failure as part of developing a culture of innovation. Companies are often criticized for encouraging managers to take risks and experiment with new ideas but abandoning them if the new growth areas fail to take hold. The future success of managers who take on innovation assignments is often tied to the idea they pursue rather than to the process they execute. So if the idea doesn’t take off fast enough, or at all, the manager sees their professional support and future opportunities dissolve.

Why is failure so toxic in large organizations? Because innovation is approached from a causal standpoint rather than an effectual one. Effectuation limits the amount of resources lost in a failure. This takes the sting out of failing.

The causal approach is based on predicting what the future holds and lining up resources to be the first to capitalize on the opportunity when the forecast comes true.

A critical component of the effectual approach is Affordable Loss. Before setting out to innovate, the parties involved determine what they’re willing to invest with no expectation of return.

The initial assumption is that the innovation will be a failure. So the company invests the minimal amount required to validate that assumption. If, however, that assumption proves to be false, and the idea does in fact gain market traction, the company has the ability at that point to put more investment into the concept. That level of corporate commitment then increases as the idea gains greater market validation.

Innovation and failure go hand in hand. The method of business forecasting most companies currently use for innovation leads them to overinvest in ideas that seem great in the boardroom but often fail to live up to expectations in the market.

Effectuation takes the opposite approach. It uses small bets to bring big results. The organization gains more comfort with innovating because the financial risk is reduced, managers are more confident taking on innovative roles because the downside is limited, and the culture of innovation thrives through effectual experimentation.

In 2015, Sara Whiffen, Principal, Insights Ignited, and Christine Pigsley, Adjunct Professor of Applied Organizational Studies at Minnesota State University - Mankato, reflected on the similarities and differences of implementing the entrepreneurial method with entrepreneurs at the corporate levels and at community colleges. Here is what they had to say.